wealthy. “Of the $2 trillion in income that was redistributed in 2012, nearly half was paid for by families in the top 1 percent .”
The Unites States tax system is set up to be progressive, those with a greater ability to pay, are supposed to pay a higher rate as it moves up the income brackets. Having a progressive rather than a flat tax rate benefits the poor, or rather takes an increasingly large portion of income as a taxpayer’s income increases. The lowest tax bracket is at 10%, while the highest is at 39.6%. With the deductions and credits, the effective tax rate is decreased, and sometimes the taxpayer even receives a refund. The refunds are from the refundable tax credits. Two major tax credits are the Earned Income Tax Credit (EITC)
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“In recent years, the tax credit’s impact on families has lifted roughly 4.7 million children above the poverty line annually .” Additional economic support to households with children is the Child Tax Credit, it provides up to $1,000 per child for taxpayers with children. However, unlike the EITC, the CTC is only partially refundable. Both the EITC and CTC assist low income households. For the lowest income quintile, the Tax Policy Center has estimated that the two credits will “…benefit 88.3 percent of these households .The Tax Policy Center estimates that, on average in, 2015, households in the lowest income quintile (the bottom fifth) will owe federal taxes equal to 3.6 percent of their income, much lower than the average 19.8 percent tax rate for all households.” However, this is without the consideration of refundable credits, which lower the effective tax …show more content…
Determining who benefits the most from federal spending and tax policies is a difficult question to answer, there are many factors that need to be considered. We will look at it from the perspective of federal expenditures. Expenditures will include revenues forgone, such as the revenue loss from the preferred capital gains rate as opposed to being taxed at an ordinary tax rate.
“American’s lowest-income families receive $5.28 worth of government spending (federal, state, and local) for every $1 they pay in total taxes. Middle-income families receive $1.48 in total spending per tax dollar, while America’s highest-income families receive $0.25 cents in spending for every dollar of taxes paid.” Middle and lower income households are the largest benefactors of the redistribution of income. In 2012, 60% of the population received more government spending than they pay in taxes, and the top 20% paid almost three and a half times in taxes compared to the benefit they received in government spending. Spending is relatively equally spread through the different income groups, but the tax liability varies
Since 1980, America has experienced a quick and drastic change in income distribution between the top 1% and the rest of the country. The graphs below from the Center on Budget and Policy Priorities show how tax policies implemented by the Reagan Administration have compounded over the past thirty-three years to create drastic income disparities.
With each class comes a certain level in financial standing, the lower class having the lowest income and the upper class having the highest income. According to Mantsios’ “Class in America” the wealthiest one percent of the American population hold thirty-four percent of the total national wealth and while this is going on nearly thirty-seven million Americans across the nation live in unrelenting poverty (Mantsios 284-6). There is a clear difference in the way that these two groups of people live, one is extreme poverty and the other extremely
(TRANSITION: But before we get into all of that, the questions I asked you for my audience analysis revealed that not all of you are as riveted by tax policy as I am-shocking I know-, so I will clarify some of the jargon I will be using. First the progressive tax is a tax system where the tax rates increase with income earned. Let’s say the first tax bracket is set at 50,000 dollars, and the first tax rate is set at ten percent, and the rate above it is set at twenty percent. So, if you make 70,000 dollars, the first 50,000 will be taxed
The tax code is devised to accommodate fluctuations in the cost of living. Even though many Americans are very wary of rising prices, this kind of change may actually assist taxpayers to economize. Changes ensure that filers find themselves in the proper tax bracket, yet they even affect tax breaks like exemptions as well as standard reductions.
While the bottom 80% is making no more than $118,000 a year, which is the 80th percentile, and have a median annual income of $48,000. The 1% makes up of around 750,000 of the 150 million families in the United States. Therefor the one percent ends up taking of 25% of all income generated by the United States economy. That is an increase of three times since the Ronald Reagan Era when the one percent only received 8% of the total income in 1979. The last time the one percent owned this much of the income total was in 1928, which was right around the time of the great
In 2012 Republican Presidential candidate Mitt Romney and his Vice-President candidate Paul Ryan introduced their idea for the future of the tax system; they called it the “Trickle-Down Effect”. The definition of “Trickle-Down” is ”an economic idea which states that decreasing marginal and capital gains tax rates – especially for corporations, investors and entrepreneurs- can stimulate production in the overall economy. According to trickle-down theory proponents, this stimulus leads to economic growth and creation that benefits everyone, not just those who pay lower tax rates”(“investopedia”). Essentially, keeping the Bush Era tax breaks in place and even broadening them in certain aspects, to promote growth throughout the business sector. They believed that by lowering taxes all across the board it would give companies an incentive to hire new employees and create new jobs. This sounds like a fairly good idea, give empl...
Between the end of World War II and the late 1970s, income inequality in the U.S. was reduced; but since 1970s, the situation with wealth distribution has changed. Data from tax returns in 1976 show that the top 1 percent of households received 8.9 percent of all pre-tax income. In 2008, the top 1 percent’s share had more than doubled to 21.0 percent.
Income inequality in the United States, as of 2007, has reached levels not seen since 1928. In 1928, the top one percent received nearly 24% of all income within the United States (Volscho & Kelly, 2012). This percentage fell to nearly nine percent in 1975, but has risen to 23.5% as of 2007 (Volscho & Kelly, 2012). Meanwhile, in 2007 (see
Reich, Robert. "Why the Rich Are Getting Richer and the Poor Poorer." Mountain View College Reader. Neuleib, Janice. Cain S., Kathleen. Ruffus, Stephen. Boston: 501 Boylston Street, Suite 900. 2013 Print.
While the the 1%, are secured, no one is addressing the rest of the people. As the economy flourishes, housing, higher education and health care, and child care increases with it to the point where 30 percent of a person’s income goes towards housing. People are finding it impossible to purchase a house with their middle class incomes. People begin to fall out of the once stable middle class because too much is needed to be sacrificed in order to live in a stable home. In the shrinking middle class, “40% or more of the residents live below the poverty
Inequality exist and is high in America because the amount of income and wealth that is distributed through power. In America the income distribution is very inequality and the value of a person wealth is based on their income with their debts subtracted. “As of 2007, the top 1% of households (the upper class) owned 34.6% of all privately held wealth, and the 19% (the managerial, professional, and small business stratum) had 50.5%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers)” (Domhoff, 2011). In contrary the poor do not get ahead and the rich get more. Americans are judged and placed in class categories through their home ownership which translates to wealth. Americans social class is often associated with their assets and wealth. “People seek to own property, to have high incomes, to have interesting and safe jobs, to enjoy the finest in travel and leisure, and to live long and healthy lives” (Domhoff, 2011). Power indicates how these “values” are not distributed equally in American society. Huge gains for the rich include cuts in capital gains and dividends and when tax rates decrease for the tiny percent of Americans income is redistributed. Taxes directly affect the wealth and income of Americans every year.
The current tax system that the United States uses contains several flaws. First of all, it is very complex. It is comprised of many various variables that can create loopholes. These loopholes can cause two equal income families to be paying very different tax rates. In fact, there are 480 different types of tax forms (Website). The current tax system is also very unfair for the wealthy. Because it is a progressive tax, it is higher for people who have higher incomes. People should not be punished for being successful. If a flat tax policy were instituted, then it would simplify the complicated tax system, create fairness within the economy, and promote a desire to thrive financially.
In this scenario, I am an English teacher and a novelist in Baton Rouge, Louisiana. The sales tax in this state is 7%. My gross income is $55, 050 with my teaching job. This number was reached because it was the national average income of a high school teacher in 2012. With this number, I fit into the tax bracket of “over $36, 900 but not over $89, 350.” With this tax bracket, an individual deducts $5,081.25 plus 25% of the excess over $36, 900 (IRS tax brackets, 2014). With these stipulations, the amount deducted from my annual paycheck was $9, 816, leaving my net income at $45, 432 annually. When the number was divided into the 12 months, it left $3, 786 dollars to work with each month.
In our opinion government spending is better than tax cuts. Government spending increases the employment as well as the income of the people of the country, though tax cut only increases the wealth of the people who may not spend the extra money earned and help in the growth of the economy.
Entin, Stephen. J. (2004). Tax Incidence, Tax Burden, and Tax Shifting: Who really pays the tax? Retrieved January 24, 2008 from http://www.heritage.org/research/taxes/cda04-12.cfm